US Needs a Free Trade Deal with Switzerland

When it comes to trade deals, the big ones such as NAFTA tend to grab headlines. But our interests are also well-served by one-on-one agreements between individual countries and the U.S. In fact, the more bilateral deals we forge, the better.

The White House seems to agree. As the Trump administration stated in its latest trade report to Congress, “The United States remains committed to working with like-minded countries to promote fair market competition around the world.”

Case in point: Switzerland. The Alpine country’s strong commitment to free-market capitalism makes it an ideal trading partner. Switzerland is clearly a prime candidate as one of the “like-minded countries” with which the United States should work more closely.

Mind you, Switzerland and the United States are no strangers to mutual trade. They’ve already made great strides in deepening economic and business ties. Switzerland is America’s 12th-largest trading partner with a roughly balanced exchange of goods and services amounting to some $100 billion annually.

American and Swiss companies produce cutting-edge pharmaceuticals, aerospace components, machinery, and equipment that flow in both directions and make the two economies more productive and competitive. Their relationship also includes business and financial services, such as banking and insurance, and licensing fees for intellectual property.

These commercial ties support high-paying jobs in both countries. According to the latest data, a combined 725,000 American jobs were supported by the U.S.–Swiss trade and investment relationship. Swiss affiliates in the U.S. accounted for more than 460,000 of those jobs, followed by almost 200,000 American jobs from services exports to Switzerland, and 75,000 U.S. jobs supported by goods exports.

Indeed, we can learn from the Swiss. They have one of the most advanced and capable free-market economies in the world. According to The Heritage Foundation’s annual Index of Economic Freedom, which measures the entrepreneurial environments of 180 economies across the globe, Switzerland is the world’s fourth-freest economy.

So what is Switzerland’s secret? It lacks natural resources except hydropower, so it has had no choice but to innovate to compete on a global scale.

Its judicial system is independent of politics, which ensures effective and transparent enforcement of commercial contracts within a fully institutionalized legal framework. It also has strong property rights, including protections for intellectual property.

So what can the U.S. do?

For one thing, as I argued in a recent Heritage report, the Trump administration ought to grant Switzerland tariff exemptions on steel and aluminum products. Swiss companies exported about $80 million in steel and aluminum products to the U.S. in 2017. Switzerland has sought these tariff exemptions, but the U.S. hasn’t yet responded. That needs to change.

Another wise step would be to build on the Trade and Investment Cooperation Forum (TICF) the United States and Switzerland established in 2006. We should elevate the TICF to a genuine free and open trade pact based on the principles of economic freedom.

Take President Trump’s “no tariffs, no barriers” proposal at the recent G7 meetings in Quebec. Why not pursue this? Zero tariffs would be the ultimate achievement for more open and free trade between the United States and Switzerland.

It’s time for the U.S. Trade Representative and the White House National Economic Council to fast-track dialogues with their Swiss counterparts in the pursuit of a U.S.–Swiss economic freedom partnership. We don’t need hundreds of pages -- the pact should be simple and readily understandable to anyone who wishes to engage in trade and investment activities between the two nations.

In their groundbreaking study on a possible U.S.–Swiss free trade deal, Gary Clyde Hufbauer and Robert E. Baldwin made the case that “as leading advocates of market capitalism, Switzerland and the United States are well situated to conclude an FTA [free trade agreement] that breaks new ground in dismantling barriers.”

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